Jumia’s share price has recently plummeted, and this week its co-founders/co-CEOs stepped down. What does this mean for direct-to-consumer services in health?
Hot takes from our Salient group chat…
Yomi: Powered by their investment capital, Jumia expanded in scope and scale aggressively, building infrastructure and operations across 12 countries over a decade, across multiple product verticals and trying to generate profitability on $1.5bn of invested capital from an addressable market that’s far smaller than most ecosystem players let on. Becoming profitable was always going to be incredibly difficult.
Mara: Agreed. In other contexts, it’s useful to remember that Amazon wasn’t profitable until seven years after it went public.
Remi: It’s also interesting to compare Jumia’s choices to Konga, a Nigerian competitor. First, unlike Jumia, Konga has largely been self-financed (since it’s purchase by the successful serial entrepreneur Leo Stan-Ekeh’s Zinox Group in 2018) and focused on achieving profitability first in Nigeria before expanding into other markets. Some sources suggest they may be close. Second, Jumia outsourced over 70% of its logistics, which is very expensive and can be less unreliable for last mile delivery. In comparison, Konga built this capacity in-house, operating largely through their KExpress logistics. Finally, Jumia was slow in recognising and responding to the challenges of pure play ecommerce as reflected in its late switch to a marketplace model, which Konga embraced much earlier. Ultimately, strategy is about choices, and the choice of where to play and how to win are critical in determining winners. It will be interesting to watch how these choices – and others – will pan out over the next few years.
Malyse: Direct-to-consumer companies need to adapt to the realities of the African markets – often by building the capacities and infrastructure that would be supplied by others in more mature markets, and by figuring out how technology can speed adoption. Many players are leveraging WhatsApp/Instagram to acquire customers at lower costs through ‘social commerce’, and WhatsApp now has strategy to develop solutions for businesses, and have added functionalities to improve the user experience, enable businesses to track orders, have a catalogue, etc. During the pandemic, they saw that WhatsApp can be used in health and now have a unit working on solutions in this space. I think these channels really have a strong chance to help crack the adoption code, which is a lynchpin for success in direct-to-consumer spaces. Otherwise, direct-to-consumer services will remain primarily in cities, and the infrastructure may have less potential to impact things like health care delivery broadly, and at sustained scale.
Mara: Though direct-to-consumer ecommerce faces many challenges and thus the short-term potential to distribute health products directly to consumers at scale is unclear, I remain excited about digital approaches that ‘super-power’ existing retail through B2B services. Outside of health, tech that helps retailers resupply food (like Twiga), and fast moving consumer goods (like TradeDepot) and more are raising tons of capital. While direct-to-consumer ecommerce finds its footing and we continue to assess its potential to help transform access to medicines, I think tech-enabled resuppliers for drug shops, pharmacies, clinics and hospitals remain ones to watch.
Yomi: While I agree there is potential in the B2B resupply in health, direct-to-consumer health companies (often online pharmacies or e-pharmacies) are nascent and are emerging at possibly the best possible time in African tech ecosystem history: funding is breaking historic markers every year, regulation is coming into place and we’re co-designing new solutions to support regulators more effectively, tech devices and internet access is also far more available than ever before. I’d bet on improved user numbers and growth rates over the next decade…but we’ll have to wait and see 🙂
Agree, disagree, other? Reach out – we’d love to chat.
